Are you preparing to claim SR&ED tax incentives? Here’s what you need to know
May 30, 2023
Canada Revenue Agency
Is your business doing research and development (R&D) work in Canada? Getting all of the Scientific Research and Experimental Development (SR&ED) tax incentives to which your business may be entitled is not only top of mind for you, but for the Canada Revenue Agency (CRA) as well.
Maintaining the fairness and integrity of the SR&ED program is a top priority for the CRA and is important to all stakeholders, including businesses claiming SR&ED credits, the tax professional community, and Canadian taxpayers. Our efforts to safeguard the program’s integrity help ensure that SR&ED investment tax credits are supporting businesses conducting eligible R&D work.
Throughout the claim process, the CRA is reminding you to make sure the information you provide, including information submitted on your behalf by a tax professional or claim preparer, is valid.
Working with a Tax Professional or Claim Preparer
If you are working with a tax professional or claim preparer to help complete an SR&ED claim:
- Select a preparer who is knowledgeable about SR&ED tax incentives and eligibility requirements. Your preparer should know what counts as eligible SR&ED work and expenditures and what information you need to support your claim.
- Review the latest eligibility of work guidelines with your preparer to understand what R&D work can be claimed.
- Make sure your preparer is available to help you better understand what’s needed for your claim through frequent, transparent communication.
- Discuss what you will need to support your claim, as your preparer can help you organize and categorize your documents. They can also help ensure that you are not missing any important information.
- Ask your preparer to include you in conversations with the CRA, should these be required.
- Make sure to provide the information requested for each preparer you are working with when completing Part 9 of Form T661. This information is a requirement per subsection 162 (5.1) of the Income Tax Act. Be leery of any preparer who asks you to omit this information from your claim.
Remember that it’s your responsibility to verify the accuracy of the information being submitted on your behalf, even if you are using a third party to prepare your claim.
Best Practices for Tax Professionals
If you are a tax professional or claim preparer, the CRA recommends adopting these best practices:
- Stay up to date with eligibility guidelines and what expenditures your clients can claim by consulting the SR&ED Program’s web pages.
- Have a system for identifying and tracking SR&ED activities and expenditures.
- Assist clients in creating a list of supporting information they will need to gather and track to support their claim.
- Ensure your clients double check the accuracy of the information they are providing to you and to the CRA.
- Avoid delays and work with your clients to respond promptly to requests for information from the CRA. If a client requires an extension, notify the CRA in advance.
- Contact the CRA if you have questions following a request for information.
- During review meetings, come prepared to discuss your client’s SR&ED project with the CRA. Ensure that your client and any key employees who worked on the project under review are included in your meetings with the CRA. They can provide important details to the CRA about costing and expenditures and explain how their work resulted in scientific or technological advancement.
Common Errors in SR&ED Claims
To ensure that your business gets the most out of the SR&ED program, avoid these common errors when preparing your claim:
- Incomplete or incorrectly filled forms: Make sure all required forms are filled in completely and accurately – leaving out sections can result in processing delays.
- Confusion about business types: Confirm your business type before submitting a claim – for example: determine whether your business is a stand-alone Canadian-Controlled Private Corporation (CCPC), or tied to another CCPC for SR&ED purposes.
- Lack of supporting information: Double check that you have all the information required to support your claim as we may ask to see it.
- Ineligible expenditures claimed: Review all claimed expenses such as salaries and wages provided in estimates to ensure they are eligible for SR&ED investment tax credits.
- Lack of information on scientific or technological advancement: Clearly identify how your R&D work focuses on scientific or technological advancement. Our eligibility guidelines can help you make sure your project descriptions fully explain the scientific or technological issue your business is trying to address, and clarify what is and is not considered SR&ED work. You can use our interactive Self-Assessment and Learning Tool to see if your R&D work may qualify as SR&ED.
- Other financial assistance not disclosed: Disclose all other financial assistance your business receives, including both government and non-government assistance. Failing to report this information can lead to processing delays, increased audit time on reviewed files and overpayments.
- Claims submitted with false information: Be certain that you are providing truthful information as we are receiving claims containing false information more frequently. If you are working with a tax preparer, remember that it’s your responsibility to check the accuracy of the information being submitted on your behalf.
- Delays in sending information or scheduling meetings with the CRA: Make sure you respond promptly when we contact you to provide us with more information or to schedule a meeting to discuss your claim.
Contact us if you have any questions. We’re here to help!
Visit canada.ca/taxes-sred to learn more about the SR&ED Tax Incentive Program.
Canada Revenue Agency
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